Personal loans are one of many types of loans you can borrow from a bank. These loans are typically general purpose loans that you can use at your discretion for things like consolidating debt or paying for an unexpected expense or small home improvement project. Personal loans are often more difficult to get and have strict qualification requirements. If you are thinking about borrowing a personal loan, here are some things you should know, according to www.thebalance.com:
Personal loans are unsecured
That means the loan doesn’t require you to use an asset as collateral. If you default on a personal loan, the lender can’t automatically take a piece of your property as payment for the loan. This is one of the reasons personal loans are more difficult to get. The lender doesn’t have any asset to seize if you can’t make loan payments anymore. Even though the lender can’t automatically take your house or car, it can take other collection actions. This includes hiring a collection agency and filing a lawsuit against you.
Personal loans have a fixed amount
The amount of personal loans ranges and depends on the lender, your income and your credit rating. The better your credit score and the higher your income, the more money you can borrow. Some banks have a cap on the amount of personal loan you can borrow.
For example, you may be able to borrow only a maximum of N100,000as a personal loan.
Unlike credit cards, personal loans are a one-time loans. You can’t borrow from the loan over and over the way you can with a revolving credit card balance. Payments toward the loan reduce the balance, but do not open up available credit that you can borrow again.
Once you pay off the loan, the account is closed. If you need to borrow again, you will have to reapply.